Projo Cars Blog

It was hardly unexpected.

President Bush today granted General Motors and Chrysler $13.4 bn billion in emergency loans to tide them over until the end of March. An additional $4 billion will be available in February.

In return, Bush sought conditions similar to those that had been negotiated in an earlier bailout plane by the White House and Congressional Democrats. That plan was shot down by Senate Republicans, notably Minority Leader Mitch McConnell of Kentucky, which has a giant Toyota assembly plant, and Sen. Richard Shelby of Alabama, which has four foreign auto plants.

Under Bush's deal, the companies are required to cut debt and hammer out an agreement with unions to lower wages and benefits to bring them in line with the aforementioned foreign auto plants in the south.

Bush said he decided to grant the bailout loan package because allowing the auto companies to collapse would be irresponsible.

I think that he is more concerned about preventing a black mark against his legacy and, by granting the short term relief, effectively hands the problem over to President-elect Barack Obama.

Here are three quick thoughts:

I differentiate between Detroit GM and GM dealers. I confess I find members of the former to be astonishingly arrogant, especially toward the press which they seem to regard as THE problem.

I may be taking something personally here, but I usually find myself being talked down to when trying to have a conversation with Detroit GM.

GM dealers, on the other hand, I find to be engaging pillars of the community, doing their best to make sales and build customer relationships.

So I feel caught between my misgivings about Detroit GM and engagement with GM dealers. And those misgivings center upon the ability for GM to produce vehicles that customers want.

As a lead opinion piece in this week's Automotive News put, Detroit needs to get its mojo back. It was referring to political mojo in the form of friends in Washington which it seems to have few right now.

More important, it needs to get its mojo back in terms of gaining credibility in the market.

Detroit ruled back in the 1950s and 1960s but saw its dominance eaten away by Asian competition, especially Toyota and Honda, which slowly but surely built a reputation for reliability and value for money by producing cars with all the charisma of bars of soap.

It was a prosaic market strategy that worked and Detroit, with all its insular arrogance, will have its work cut out to duplicate it, especially as one of the key ingredients is time.

Second, the politics of the workplace.

Anyone who has worked in a corporation knows how the role of politics is paramount.

I remember coming out of academia with graduate degrees that qualified me in certain ways but a naiveté about office politics that was just pathetic. I actually thought that if I worked hard and was cheerful, I would get ahead!

Corporations are laden with office politics and the older the organizations, the greater the chance that politics can really reduce any theoretical efficiency to an unworkable situation as the old guard holds on to fiefdoms and traditional ways of doing things.

I have worked in corporations big and small and none escape this curse, although new organizations tend to fare better because inertia has not had time to build up.

The reason for this tiresome diatribe on office politics? Simply to point out that whatever conditions are laid on GM, indeed, whatever initiatives are created within the organization, office politics in an outdated behemoth like that are likely to undermine much forward-looking thinking let alone action.

And given that chairman Rick Wagoner is a business school bean counter rather than a car nut, I have my doubts he can cut through the politics effectively.

Finally, Chrysler's sad situation

Is Chrysler a car company? It seems to me that an argument could be made that it has become merely a cog in the $24 billion financial web spun by reclusive financier Stephen Feinberg, the chairman of private quity firm Cerberus Capital Management.

Cerberus has interests in a multitude of industries and companies linked through percentage ownerships that are not exactly made explicit in the private equity company's web Site.

Having acquired 80 percent of Chrysler from Daimler a year or so ago, Feinberg brought in the Bob Nardillo, who had been recently fired, partly for his overbearing manner, by Home Depot with a parachute of $210 million. Like Wagoner, Nardillo is a professional bean counter with no known passion for cars.

Having acquired Chrysler for some $6.7 billion - although the deal was so complicated it is hard to get a straight play on the numbers, Cerberus is now set to get some $7 billion in bailout loans for its auto company even though it is offering almost nothing that customers want.

It will be interesting to see what sort of restructuring plan this dog will come up with by the end of March.

- Peter C. T. Elsworth

 Tags  Bailout loans Bush Cerberus Chrysler Commentary General Motors

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